MBA Program

Accounting Principles Course

Exercise (3)
SOLUTION

Barbara Fair is a licensed architect. During the first month of the operation of her business, the
following events and transactions occurred.
April 1 Invested $45,000 cash.
1 Hired a secretary-receptionist at a salary of $500 per week payable monthly.
2 Paid office rent for the month $800.
3 Purchased architectural supplies on account from Dakin Company $1,500.
10 Completed blueprints on a carport and billed the client $1,800 for services performed.
11 Received $500 cash advance from D. Ellington for the design of a new home.
20 Received $1,500 cash for services completed and delivered to J. Leno.
30 Paid secretary-receptionist for the month $2,000.
30 Paid $600 to Dakin Company for accounts payable due.

Required:
- Show the effect of the above transactions on the accounting equation using the following
format
Assets Liabilities Owner’s Equity
Unearned Owner’s
Date Cash A/R Supplies A/P Revenues Expenses
Service Revenue Capital
1/4 45,000 45,000
2/4 -800 -800
3/4 1,500 1,500
10/4 1,800 1,800
11/4 500 500
20/4 1,500 1,500
30/4 -2,000 -2,000
30/4 -600 -600
Total 43,600 1,800 1,500 900 500 45,000 3,300 -2,800

46,900 46,900

- Journalize the transactions

- Post to the ledger accounts
Journalizing the transactions
April 1
Cash.................................................................... 45,000
Owner’s Capital..........................................................45,000

April 2
Rent Expense.......................................................800
Cash .......................................................................... 800

April 3
Supplies...............................................................1,500
Account Payable....................................................... 1,500

April 10
Accounts Receivable...........................................1,800
Services Revenue ......................................................1,800

April 11
Cash.....................................................................500
Unearned Services Revenue ......................................500

April 20
Cash....................................................................1,500
Services Revenue ......................................................1,500

April 30
Salaries Expense ............................................. 2,000
Cash...........................................................................2,000

April 30
Accounts Payable ...................................................... 600
Cash...........................................................................600
Posting transactions to ledger
Cash
1/4 45,000 2/4 800
11/4 500 30/4 2000
20/4 1,500 30/4 600

End. Bal. 43,600

Owner’s Capital
1/4 45,000
End. Bal. 45,000

Rent Expense
2/4 800
End. Bal. 800
Supplies
3/4 1,500
End. Bal. 1,500

Accounts Payable
30/4 600 3/4 1,500
End. Bal. 900

Accounts Receivable
10/4 1,800
End. Bal. 1,800

Service Revenue
10/4 1,800
20/4 1,500
End. Bal. 3,300

Unearned Service Revenue

11/4 500
End. Bal. 500

Salaries Expense
30/4 2,000
End. Bal. 2,000